Our Reward Systems Are Broken

Jay Arthur
888-468-1537
303-756-9144
KnowWare International, Inc.
DBA LifeStar
2253 S. Oneida
Ste 3D
Denver, CO 80224

We work with companies
that want to fire up their profits using
Lean Six Sigma

Copyright © 2011

One of the biggest challenges to Lean Six Sigma are existing reward systems. They are rewarding the wrong things.

A couple of months ago, I sat on a jury in a juvenile sexual assault case involving alchohol. At one level, the case was about two drunk underage teens having sex, which is not that rare of an occurrence. Our laws, however, state that it doesn't matter how intoxicated the perpetrator is when a crime is committed; they're still responsible. And it doesn't matter how drunk the victim was when it happened; they aren't responsible. Based on our laws, the boy was guilty of sexual assault.

The same principles don't seem to apply to business leaders. Drunk on profits created by subprime lending, banking leadership teams demolished companies, shareholders and employees. And even a world economy. When asked about their cupability in this debacle, the best they seemed to say was "I didn't know" which isn't that different from "I was drunk."

Rewarding the Fix-It Factory
When I was in the phone company, we had thousands of people fixing incorrect orders, bills, returned mail, installation and repair errors. Every one of these employees got raises and bonuses based on fixing errors, not preventing them.

According to one BusinessWeek article I read, 15 out of every 100 patients are misdiagnosed. Doctors still get paid for the visit. I've been in emergency rooms when patients return after being discharged because they still have undiagnosed symptoms. That's rework!

Sales people are often rewarded for making the sale, but not for making a "good" sale just like lenders were rewarded for making loans, but not good loans. If you sell a monthly service, but customers don't stay long enough to make a profit, should sales people be rewarded? Nope. Adding and removing customers costs a lot of money. The sales call was wasted time that could have been spent on a better prospect.

Six Sigma Rewards
Too many Six Sigma implementations measure and reward the quality department for the number of people trained, belts certified, and teams started. Let's face it, it doesn't matter how many people you train if they don't generate bottom-line, profit-enhancing results.

Reward Systems
Existing reward systems encourage managers and employees to maintain and enhance the status quo. Even though our president was elected on a platform of change, everyone wants someone else to have to change. "It's not me; it's the other guys. If only my suppliers would change; I could do a better job. If only my customers would change; I could do a better job. It's not my fault."

I'd like you to consider that existing reward systems are holding you and your company firmly in the grip of delays, defects and deviation that are costing you customers and profits. Without improvements to the rewards system, no one will be motivated to fix the process problems that plague the company. They'll just keep plodding along, fixing the products and services that are broken. They'll lament over coffee breaks about how screwed up it is.

Everyone is afraid that if they use Lean to be faster that there won't be enough work and someone will get laid off. Fix-It factories worry that if the production line stops making defects that they won't have a job.

Get over it! If a company accelerates the delivery of quality products and services, customers will flock to it. They don't have time to deal will slow service or crappy products.

Robert Wood Johnson Hospital, for example, shortened the typical emergency room visit from two hours to 38 minutes on average. They've been growing at a rate of over 10% per year and even had to add a new wing onto the hospital to deal with the patient volume.

Here's My Point
Reward systems are one of the major barriers to implementing the kind of improvements possible with Lean Six Sigma. They are also one of the hardest nuts to crack in any business because everyone is afraid of how it will impact them. But if you want to accelerate the benefits of Lean Six Sigma, you'll have to remove this roadblock and pave the path to endless improvement. Otherwise you're doomed to slide back into sluggish, defective ways of mediocre performance. It's up to you.

© 2008 Jay Arthur, the KnowWare® Man, works with managers who want to plug the leaks in their cash flow.

Hire Jay Arthur to train your staff in his one-day Lean Six Sigma Workshop! Contact Jay at (888) 468-1537, support@qimacros.com.

Rights to reprint this article in company periodicals is freely given with the inclusion of the following tag line: "© 2008 Jay Arthur, the KnowWare® Man, (888) 468-1537, support@qimacros.com."

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